OK. This may help.
I just did a fresh install on my test machine and the trash icon works fine.
The desktop system that's giving me grief was upgraded from a Gutsy install.
Something must've been botched in the upgrade process.
Is it possible an old setting is conflicting on the upgraded box?

If this is a bug, it may only affect dist-upgraded systems... Or I may
just be lucky.

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gconf-editor (Hardy) will not allow trash icon on desktop despite selection
https://bugs.launchpad.net/bugs/222032
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